Moved from USA to Canada in August 2024. I have a few questions

[ptayal95]

Hi,

I, along with my wife moved from USA to Canada in August 2024. We were resident alien there and had been living for 5-6 years and working for last 3 years. We started working in Canada starting August. In Canada, our status is Permanent Residence. I have a few questions, although I read through forums, but could not get a definite answer to all of them

Q1: Can we file as a resident alien instead of dual status alien even though we moved out of US mid year? Our status was F1 visa in US, but we qualified as a resident alien because we stayed > 183 days. Asking this because this will enable us to file jointly in this case, and also use standard deductions. We don't have any itemized deductions.

Q2: If yes to Q1, then I have to declare my Canadian Income starting August 2024 as foreign income in US right? Can I get the refund from CRA on the US tax paid on Canadian sourced income? Do I use form T2209 in this case. I am unclear on how to get tax refund in this case. 

Also, this is our first time moving to Canada

Thanks !!

[DaveF1006]

Yes, you may choose to file as a US resident for the entire year because you met the 183 day residency requirement. You will need to declare your worldwide income, which includes the income you earned in Canada.  To avoid being taxed twice, you will need to apply for the Foreign Tax Credit in TurboTax. This'll give you a difference between the US tax rate and the foreign tax rate. Here is how to get started claiming a foreign tax credit.

1. Go to Federal
2. Deductions and credits 
3. Estimate and other taxes paid 
4. Foreign Tax Credit>start or revisit
5.  As you go through the screens, when it asks "Tell Us About Your Foreign Taxes" select none of these apply.
6. When it asks if you wish to take the deduction and credit, take the credit.
7. Continue through until you reach a screen that says "No other income or expenses" Say no
8. Continue through until it asks for the income type, say General Category Income
9. Next add a country, pick Canada
10. Continue through the interview until you are done with this section.

[ptayal95]

Thanks a lot for the reply. I successfully followed how to add my Canadian income in TurboTax USA

Follow up question:

Do I file Canadian Tax return on TurboTax Canada before claiming foreign tax credit on TurboTax USA? Also, do I separate foreign taxes paid for me and my spouse? Or just add a combined number?

Thanks a lot !!

[DaveF1006]

Yes, since you are now in Canada, you will claim a Foreign Tax Credit on your Canadian return.

[ptayal95]

Sorry maybe I misunderstood, does claiming foreign tax on my canadian return mean I take the credit from IRS for tax paid on canadian income in canada?

or is the credit from CRA for tax paid on canadian income in US.

Please clarify if its option 1 or option 2.

Regards,

Piyush

[AmyC]

The tax paid to the US is used on your Canada return. The US tax will be the foreign tax paid claimed on your Canada return.

[ptayal95]

Thanks !! So will there be any way I can get just the US tax paid on Canadian income in the US?
If I follow, you are suggesting the following:

Step 1 - File US return declaring Canadian income as foreign income

Step 2 - Calculate the tax paid on Canadian income on US return (How to calculate this)

Step 3 - File Canadian return claiming tax from Step 2 as foreign tax credit

How do I calculate Step 2 in this case?

Alternatively, is there any way I can do the following steps instead? 

1.) File a Canadian return first

2.) File US return showing Canadian income as foreign income

3.) Claim Foreign Tax Credit on US return equivalent to the Tax paid to CRA on Canadian return

Thanks so much for the follow ups !!

[DaveF1006]

Yes, if you file as a full-year resident, you can claim a foreign tax credit on your Canadian income, so your second option is correct.